A mid-term rental fills the gap between a short vacation stay and a long-term lease. A mid-term rental (MTR) is commonly defined as a fully furnished property that is leased to a tenant from one to 12 months. Interest in MTRs took off during the 2020 COVID pandemic when traveling nurses were in high demand. Today, the rentals are a growing trend among a myriad of professionals and others, such as college students seeking alternative housing and homebuyers awaiting the completion of a newly built residence.
If you are considering adding a mid-term rental property to your investment portfolio, there are possible benefits, as well as potential drawbacks to weigh in helping you to decide if operating an MTR is worth it.
Possible Benefits
Higher income potential
Mid-term rentals often command higher monthly rates compared to long-term rentals. Owners can price these properties closer to the nightly rates offered for short-term rentals with reduced vacancy gaps and turnover costs. Tenants looking for temporary housing are usually willing to pay more for the convenience of a move-in-ready space.
Flexibility for the owner
Mid-term rentals attract a diverse range of tenants, from professionals on temporary assignments to students and relocating families. This variety can reduce dependency on a single tenant type, and it gives you a larger pool of prospective renters to choose from when marketing the property.
Owners can also frequently adjust rental terms and pricing to quickly adapt to changes in the rental market. This responsiveness can help maximize occupancy rates and income, especially in fluctuating markets.
Reduced wear and tear
Unlike short-term rentals that accommodate different guests every few days, mid-term rentals see fewer occupant rotations. Having an MTR means a reduced number of cleanings between occupants, fewer repairs, and lower property maintenance costs. A reduction in wear and tear costs can add up to significant savings!
Steady demand
With more professionals adopting remote work and companies offering temporary placements or relocations, the demand for mid-term rental homes has grown significantly. It's especially appealing for people needing flexibility without any termination penalties found in long-term leases.
Potential Drawbacks
Regulatory hurdles
Mid-term rentals often fall into a legal gray area. Some cities enforce strict regulations for short-term rentals that inadvertently affect mid-term stays, too. Property owners should review local laws to ensure compliance. The rental property lease agreement may need to contain specific clauses that apply to the duration of the stay, procedures for extending or terminating the lease, and any special conditions related to furnished accommodations or shared amenities.
Tenant turnover
The average lease length for an MTR is two to six months. This means that you could be managing two to six tenant stays per year. While this is less frequent than short-term leases, it’s still higher than what you’d face with long-term leases.
Uncertain income
The irregular nature of mid-term tenancies can mean occasional vacancies. Owners who rely on a steady rental income may face financial uncertainty during gaps between tenants.
Maintenance costs
Tenants often expect mid-term rentals to be well-maintained, fully stocked, and furnished. Owners need to consistently allocate time and resources to meet these expectations, including resolving minor repairs quickly.
Additional Considerations
Location
Is the rental in an area where the target market is plentiful? (for example, near a university, a large hospital, or a bustling business district)? Is there public transportation nearby? Are grocery stores or restaurants in the vicinity? Can a tenant easily access the interstate?
Maintenance
Do you have maintenance protocols in place that will allow for a rapid response to any issues that arise? Is there a cleaning checklist that you will use to ensure upkeep between tenants? How often will you conduct thorough inspections?
Furnishings
Are you able to adequately furnish the rental? Is the furniture visually appealing and sturdy? Can you provide items such as linens and cookware? Will the replacement cost for damaged or missing items be accounted for in the deposit or in the monthly rent?
The rental landscape provides owners with an alternative to offering short or long-term leases. While mid-term rentals offer great perks, they’re not without challenges. Tapping into the mid-term rental market could be a viable option, especially if you are looking to transition from the frequent turnover (and the demands) of short-term leases. With lower management demands, and consistent cash flow, mid-market rentals can strike a balance for property owners seeking stability, profitability, and ease of management.
FAQ
Who seeks mid-term rentals?
Business professionals traveling for work often prefer mid-term rentals as they provide a more personal and comfortable living space compared to hotel stays. These rentals allow professionals to feel at home during long projects, training sessions, or temporary assignments, ensuring they are well-rested and productive.
Contractors working on specific projects in a location, such as construction crews or IT consultants, commonly look for mid-term rentals. They value the convenience of a fully-furnished space that eliminates the hassle of setting up a temporary residence.
Patients who need to remain near hospitals or medical centers for ongoing treatments or follow-ups often rely on mid-term rentals. These properties provide a peaceful, home-like environment for healing and recovery, especially for those traveling far from their primary residence.
How can a mid-term rental attract prospective tenants?
Take quality photos. Showcase your property with high-quality, well-lit photos that highlight its best features. Clean and staged rooms create a strong first impression and help your property stand out in a competitive rental market.
Be competitively priced. Research similar mid-term rentals in your area and set a fair price. A competitively priced rental attracts more inquiries and ensures your property stays occupied consistently. Remember, long vacancies can cut into your profits.
Offer upscaled furnishings. Providing stylish, durable, and functional furnishings enhances the appeal of your property. Invest in comfortable furniture, modern décor, and practical items like storage solutions to create a welcoming and livable space.
What financial costs should be taken into consideration?
Outfitting your property with quality furniture comes with upfront costs, but durable items pay off in the long run. Consider pieces that are both appealing and built to withstand frequent tenant use.
Many mid-term renters expect utilities like electricity, water, and gas to be included in the rental cost. Calculate these expenses in advance to set a competitive yet profit-generating rental rate.
Offering extra features like streaming services, stocked kitchen essentials, or a washer and dryer enhances your property’s appeal. Be mindful of the expense, but remember that thoughtful amenities can justify higher rental rates.
